From The Beehive Column: September 2013

Our sheep-meat exports to China expanded in the last twelve months from under $250 million to over $550 million. Already China has moved from our fourth market to overtaking Europe as our largest market and it has taken one year to do it. There is nothing in our trading history like that.

It took our predecessors decades to build our old supply chains into the Anglo-Saxon dominated trading world of the second half of the 20th Century. We have a goal to increase the ratio of exports to GDP by around ten percentage points to 40% of GDP by 2025.

On the basis of projections of GDP growth, it requires us to grow our exports of goods and services between around 6.5 to 7.5% on average per annum for the next 12 years.

That’s tough, but we have done it before over a comparable period. In the 11 years 1990 to 2001 we averaged annual nominal export growth of 7.6% – the top end of the range we need today to meet our 2025 target.

Despite the recession from 2008 to 2013, our exports of goods has grown 4% on average. Our services exports, dominated by tourism and education, have been really badly affected by the international slow-down and high exchange rate. They have grown by just 0.6%.

Overall, if our exports of goods and services continued to grow on the historical performance of the last decade, by 2025 we would be $20 to $25 billion short of the 40% target. Alternatively expressed, we are about 75% of the way to our long-term target. We are going to have to stretch our collective work rate.

All the key international trends are moving in our direction, creating the conditions for an enhanced export performance.

Not so long ago we sold our products to the developed, and predominantly Anglo-Saxon, world. Why? Because that was where most of the people with the discretionary income to buy our high quality products lived.

It is completely different today. Today, there is an estimated 500 million middle class in the emerging economies and this is projected to multiply by a factor of six to some 3.2 billion by 2030.

In 2000, 4% of Chinese households were ‘middle income’ (defined as between US$9,000 and $34,000 per annum). This figure is expected to be 75% of households in ten years’ time. This is a massive opportunity for New Zealand.